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CMA scrutinising Microsoft’s relationship with OpenAI

The UK competition watchdog fears it has effectively “resulted in the creation of a relevant merger situation” between the software giant and OpenAI.

By Greg Noone

The Competition and Markets Authority (CMA) is inviting relevant stakeholders to comment on whether Microsoft’s partnership with OpenAI is impacting competition to provide AI services in the UK. This “Invitation to Comment” (ITC), said the regulator, would ask if the partnership between the software giant and the AI research organisation constitutes a “relevant merger situation” under the Enterprise Act 2002 that would inhibit competition for AI products and services. The ITC will be open from 8 December to 3 January 2024. 

The reflection of the Microsoft Window logo in a phone screen also displaying the OpenAI logo.
The UK’s Competition and Markets Authority is concerned that the close relationship between Microsoft and OpenAI might be a little too close. (Photo by Camilo Concha/Shutterstock)

“The invitation to comment is the first part of the CMA’s information gathering process and comes in advance of launching any phase 1 investigation,” said the watchdog’s senior director for mergers, Sorcha O’Carroll. This, she added, “would only happen once the CMA has received the information it needs from the partnership parties”.

OpenAI chaos and Microsoft relationship piques CMA’s interest

The announcement follows a previous investigation by the regulator into foundation models, where it noted “both opportunities and risks for competition and consumer protection” arising from these powerful AI programs. As such, the CMA says that it has been “closely monitoring the impact of partnerships and strategic agreements which could result in a weakening of competition in the development or use” of foundation models. 

Arguably the most notable of these partnerships is that between Microsoft and OpenAI, with the latter’s foundation model GPT-4 now woven into many of the former’s products and services. These include its Bing search engine, its Office software and various other applications accessible via its Azure cloud platform

Additionally, said the CMA, there have “recently been a number of developments in the governance of OpenAI, some of which involved Microsoft.” This appears to be a reference to the chaotic events at OpenAI last month when its board unceremoniously fired and then rehired its chief executive and co-founder, Sam Altman, in less than a week. The resolution to that debacle involved Microsoft acquiring an observational seat on OpenAI’s reconstituted board, adding to several multi-billion dollar investments made by the software giant into the latter earlier this year. 

CMA’s other investigations rumble on

The CMA added that its investigation into foundation models will continue, with a view to publishing an update on how developers in the space are leveraging computing power and data through strategic investments, mergers and acquisitions in March 2024. The watchdog is also investigating Microsoft for competition concerns related to its cloud business, following a separate inquiry by Ofcom. 

That investigation by the media regulator concluded that inequities had likely resulted from the outsized market share of three “hyperscaler” providers of cloud computing services in the UK, namely Google Cloud, AWS and Microsoft Azure. The CMA said that its inquiry would consider “whether there are competition concerns” arising from this state of affairs and, “if so, what interventions can improve the supply of these important services for UK customers”.

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